Variations to BT’s Undertakings under the Enterprise Act 2002 in respect of 21CN, Space and power and Operational Support Systems separation

Summary

1.1 This consultation seeks views from interested parties on three proposed variations to BT’s undertakings (“the Undertakings”) under the Enterprise Act 2002. The three variations relate to:

• BT’s consultation principles with respect to the deployment of its Next Generation Network (NGN), and an obligation on BT to publish its NGN plan of record on a regular basis;
• the processes and products used to manage accommodation within BT’s exchanges; and
• the requirement to implement physical separation of certain Operational Support Systems (OSS).

1.2 Ofcom is proposing to agree to these variations. Our reasons for this are detailed in this document.

1.3 The first of these variations will commit BT to follow published guidelines when it consults on products or network design decisions related to its NGN. In addition, this variation will commit BT to publishing a plan of record for its NGN programme on a regular basis. The plan of record will include the information other communications providers need in order to be able to interconnect to BT’s NGN.

1.4 In our review of the impact of the Telecommunications Strategic Review (TSR Review) published on 10 December 2007 we said that we thought that clear consultation was “of paramount importance to ensure that BT’s next generation network deployment does not unfairly restrict access.” We also said that it was important to avoid situations where communications providers may not be aware of whether they have up to date information on BT’s NGN rollout plans which they need in order to plan their own networks.

1.5 The variation in relation to NGN consultation and information publication formalises commitments made by BT to resolve the issues we highlighted in our TSR Review. On this basis we propose to agree to this variation.

1.6 Our TSR Review also highlighted several issues related to space and power within BT’s exchanges. We said that we were concerned that Openreach does not exert sufficient control over the process of space allocation to manage its own products effectively. We explained that there were a number of cases where space and power had not been available for communications providers using Local Loop Unbundling (LLU), which prevented them from deploying equipment in some exchanges. Communications providers were also concerned that this problem was made worse because BT was reserving space for its NGN deployment. We also expressed concern that Openreach’s accommodation product was contractually restricted to supporting only LLU related equipment. This restriction required communications providers to obtain alternative space to meet other requirements and resulted in an inefficient use of space.

1.7 The proposed variation will add a series of commitments related to the space and power products and processes operated by Openreach to the Undertakings. The proposed variation will commit Openreach to implementing a proactive review process of space availability, including a commitment to audit exchanges where conflicts in requirements for space may occur. It will also set in place a process by which allocations of space for BT’s NGN are made. The proposed variation will commit Openreach to consult on the development of a more flexible co-mingling product to allow products other than just LLU to use this space.

1.8 We are proposing to agree to the variation related to space and power because we believe it addresses the key issues raised in our TSR Review related to space and power management and allocation.

1.9 In our June 2007 statement we agreed to vary the Undertakings in respect of changes to milestones for Operational Support Systems (OSS) separation. We also highlighted that there were particular risks around physical separation of BT’s fibre inventory management systems. Since then we have further discussed the separation of these systems with BT and considered potential risks in more depth. Implementing full physical separation would risk disrupting the service provided by BT to other communications providers, including BT’s own downstream divisions. We are, therefore, proposing to agree with BT to an approach that allows a limited amount of sharing of some fibre inventory management systems. BT proposes to implement a service level inventory to remove the need for access to Openreach data for the majority of users in BT’s other divisions. We consider that this is a pragmatic solution to the complex issue of physically separating the fibre inventory management systems and reduces the risks to customer service posed by full physical systems separation. Therefore, we are proposing to agree to vary the Undertakings to reflect this limited amount of systems sharing and the requirement for the rest of BT to use a separate service level inventory.

1.10 BT has also indicated to us concerns that meeting the Undertakings’ milestones related to the separation of systems supporting the supply of voice services may result in customers being negatively impacted. We have discussed alternatives with BT and are proposing to agree an approach which still results in physical separation of systems by 30 June 2010 but does not require data to be migrated out of Openreach systems into BT Operate. Instead, operational separation will be achieved by moving some BT employees into Openreach and by developing a new system to manage any exceptions to the automated process for provisioning voice services that is already in place between Openreach and BT Operate. Whilst this approach results in physical separation, it means two of the interim milestones no longer reflect the solution that will be implemented and are hence no longer relevant. Therefore, we propose to agree to vary the Undertakings to instead commit BT to the development of the exception handling system and to move users onto this system.

1.11 Section 155 of the Enterprise Act requires that Ofcom consults where it proposes to amend the Undertakings in a material respect. We do not believe the proposed changes to the Undertakings are material as they do not affect the overall solution provided by the Undertakings.

1.12 We do not believe the variation related to BT’s NGN is material as it provides clarity of process around mechanisms envisaged in the Undertakings.

1.13 Further, we do not believe the variation in respect of space and power is material as it adds clarity around the processes that Openreach will operate in supporting the products that it is required to provide by the Undertakings. The proposed variation also places on Openreach the obligation to consult with customers on developing a more flexible space and power (co-mingling) product to allow communications providers to more effectively use Openreach’s LLU and Ethernet products. We do not believe this in any way has a negative impact on the solution provided by the Undertakings as these obligations seek to resolve issues that have arisen as a result of implementing products included within the Undertakings.

1.14 We do not believe the variation related to Operational Support Systems separation for fibre inventory management systems and supply side separation for voice services will affect the overall operation of the Undertakings in a material way because it still delivers physical separation in all but a very limited number of cases where we believe that physical separation may have a negative impact on the service offered by BT to consumers and communications providers.

1.15 However, we believe the specific issues addressed by these proposed variations are of importance to CPs and ought to be consulted on. It is our view that a six week consultation is appropriate in this case. Ofcom intends to publish a final statement with respect to the variations within this Consultation in September 2008.